He Did Fool Us
Now we must take some credit at we called the dismal housing report and the market should have reacted negatively, but that did not happen. Overnight, there was some manufacturing news out of China that was not good, but better than expected. That triggered some hope in Europe which did have ok economic news which fueled a bit of a rally in Europe. The money on the sidelines here jumped in and we were off to the races. A 3% rally took place only slightly hampered by a 5.9 earthquake in the capitol. We have never seen congressman or senators move so fast. Normally they have to be dragged away from a podium, but not today. Exit Stage Left!
At least now we know something that can shake up DC politicians.
Now volume in the market was not huge, but the numbers stuck and we claimed a nice gain. Our gold came down a proportional 3% and we are watching that real close. Most of the portfolios we are involved in are enjoying 30%+ gains on the shiny stuff. If it comes down another 3%, we will take the money down and figure out where to deploy.
In the main portfolio we watched the GS call option we mentioned last night do about what was expected. It was up about 2% today. We want to see a 20% gain which we believe is coming. We were within pennies of a huge payday on our VXX option, but the rally cooled the VIX index and we say our gains drop about 20% on that option. We are confident we will see our number this week. There are going to be a lot of disappointed people (many of them buyers today) on Friday when Bernanke spends a lot of time saying nothing.
We did take down a sizable position in JJG, our grain ETF. After about 5 months of waiting for inflation, it just is not coming. We already backed out of DBA about a month ago. It was a broader agriculture ETF and was an inflation play. We made enough to cover the trade costs.
There was a question today about the value of AMZN Amazon. Thought some of you might appreciate our perspective on the company's valuation. The question revolved around the high multiples for the stock. Here is our reply:
"The over valuation you refer to is tough to explain, but if you have not already done so, look at the 10Q filed July 27, 2011. While they have very impressive earnings growth and top line growth (even adjusting for currency exchange) there is a sleeper item. Do a "control F" search for AWS (Amazon Web Services) in the document. As you know this is their bet on being a top line provider of cloud services. CRM, AMZN, GOOG, MSFT, VMware and the like will control this critical web environment. Look at the dollars being focused on the continued development of this sector of their business. Couple that with the demise of Border's and Amazon's slow but persistent attempt to grow vertically by securing recording rights and publishing rights, you have the makings of an amazing organization. And it would be an amazing organization with obscene margins. The only thing that will keep that from happening will be a draconian legislation against AMZN specifically.
Fears about retail sales tax and the inevitable VAT tax in the US should be equally applied to all sector participants so AMZN will rise and fall with the tide. If the government torpedoes AMZN directly than that is a different scenario. Hope that helps. Here is the link to the SEC page for their 10Q if you need it."
You can hit the sack early tonight Russ.
Salve Lucrum
